Consumer Confidence, Auto Sales Hit Lows

(MoneyWatch)  As 2009 gets underway, U.S. consumers are feeling like Joe Btfsplk, the character in the "Li'l Abner" cartoon with the perpetual black cloud over his head.

The Conference Board Consumer Confidence Index hit a new low in December, at 38, according to the research organization. (The index uses 1985 = 100 as a reference point.)

The index had posted a slight increase in November, only to fall again. The group announced December results on Dec. 30.

Unfortunately, consumer confidence correlates closely with auto sales, said Mark LaNeve, vice president, GM North America vehicle sales, service and marketing. A couple of forecasters have predicted the Seasonally Adjusted Annual Sales Rate for December will fall below 10 million cars and trucks, the lowest in 26 years.

"Consumer confidence, of all the factors you look at, that's the one that's the biggest driver of new-vehicle business," LaNeve said in a conference call on Dec. 30.

Of course, consumer confidence is a symptom, not a cause. Underlying factors include falling home values, rising unemployment, falling stock markets, business failures, volatile energy prices and the credit crisis.

By the same token, restoring consumer confidence will take a mix of positive factors, such as an expected economic stimulus package from the Obama Administration, improved access to consumer credit, and the effect of lower interest rates, La Neve said.

"How much is lack of credit, and how much is consumer confidence? It's all mixed together. We will crawl out of the recession one activity at a time. For instance, with lowering mortgage rates and refinancing. It's fairly dramatic, when people refinance their homes, historically, they spend some of that money on new vehicle purchases, so that helps," he said.

Eventually, enough positive factors will stack up to result in better consumer confidence, LaNeve said. "You gotta believe, 2009 will be a better year than 2008 was," he said.